GROWTH IN CHINA -- AND HIGHER CHINESE STOCKS -- BOOSTS STOCKS AND COMMODITIES -- ENERGY AND PRECIOUS METALS ARE TURNING UP ALONG WITH THEIR SHARES -- SILVER IS LEADING GOLD HIGHER -- NYSE COMPOSITE AND SOX HIT NEW 2010 HIGHS

JUMP IN CHINESE SHARES BOOSTS COMMODITIES ... Stocks and commodity markets are rallying today on news of an expansion in manufacturing in China, which is the world's biggest user of commodities. A few weeks back I wrote that weakness in Chinese shares was one of the factors weighing on commodity markets (along with a stronger dollar). With the dollar looking overbought and vulnerable to profit-taking, attention is now turning to China. And the news there is good. Chart 1 shows the China iShares (FXI) surging 2.5% today to the highest level in three months. The FXI has also broken a five-month resistance line. That's giving a strong boost to Emerging Market iShares (Chart 2) which are soaring today (thanks also to big gains in Brazil, India, and Russia).

Chart 1

Chart 2

OIL ETF TESTS RESISTANCE... Metal and energy prices are leading today's commodity gains. Chart 3 shows the United States Oil Fund (USO) challenging its January highs (gasoline is doing the same). An upside breakout in both appears likely. That's giving a big boost to energy shares which were market laggards during the first quarter. Chart 4 shows the Energy SPDR (XLE) gapping more than 1% higher today and nearing a challenge of its February high. The XLE/SPX ratio (below chart) is turning up for the first time this year. Energy shares appear to represent a relative value in this year's rising market. The same is true with precious metals and their related shares.

Chart 3

Chart 4

PRECIOUS METALS ARE TURNING UP ... Precious metal shares are rallying more than 3%. Chart 5 shows the Market Vectors Gold Miners ETF (GDX) moving up to challenge its March high. Its falling relative strength line (below chart) shows the GDX underperforming the SPX during the first quarter. That may be changing, mainly because precious metal prices are turning up. On March 16, I showed Gold Trust Shares (GLD) forming a potential "head and shoulders" bottom with a "neckline" drawn over its January/March highs. A close over that neckline would confirm that bullish analysis. One of the reasons I believe that will happen is that silver is leading it higher. Chart 7 shows Silver iShares (SLV) already trading at the highest level since January.

Chart 5

Chart 6

Chart 7

NYSE AND SOX BREAK OUT TO 2010 HIGHS... Up until today, the NYSE Composite Index was the only major U.S. index that hadn't broken through its January high. That was largely due to its heavy weighting in material stocks. A strong bounce in that sector today is helping push the NYA to a new recovery high. Chart 8 shows the NYA trading over 7500 for the first time since 2008. That's not the only index breaking out. Chart 9 shows the Semiconductor (SOX) Index trading over its January high near 370. That's also giving a nice boost to technology share and the market as a whole.

Chart 8

Chart 9

STEEL STOCKS HIT NEW HIGHS... Steel stocks are also on a tear. Chart 10 shows the Market Vectors Steel ETF (SLX) breaking through their January highs for the first time since 2008. Its relative strength line (below chart) is also hitting a new recovery high.

Chart 10